Beijing Weighs Curbs on the AI Models Americans Love

People are building things here in America again, and this moment calls for the best of America, our people. Introducing America's Workforce Academy, built by Meta, a program helping to train the next generation of welders, fiber installers, crew leaders, and more. Paid training, a job, and a path to America's future, because the future is for everyone. Learn more at meta.com slash America's Workforce Academy. Maine's popular Senate candidate Graham Platner drops out of the race under heavy pressure from Democrats. Plus, China considers restrictions on the homegrown AI apps U.S. companies are addicted to. American businesses have been adopting them because they cost a lot less to run. But now Beijing's concerned that sharing some of this technology could help adversaries or malicious actors against China. And fears of an AI wealth boom in San Francisco fires up the housing market. It's Thursday, July 9th. I'm Daniel Bach for the Wall Street Journal, filling in for Luke Vargas. And here is the AM edition of What's News, the top headlines, and business stories moving your world today.

We are suspending campaign operations. Main Democratic Senate candidate, Graham Platner, has ended his campaign following a sexual assault allegation, which he fiercely denies. This is incredibly difficult because I know that some will think it's an admission of guilt, and it most certainly is not. We're not doing it because of the allegations. We're doing it because of the structures that are being taken away from us by those in power. In an 11-minute video, Graham Platner blamed the media and party establishment for forcing him out of the race. His exit leaves state Democrats scrambling to find a replacement to challenge Republican incumbent Susan Collins on the November ballot. Journal editor Aaron Zittner says that losing this pivotal seat would complicate the Democrats' path to winning back control of the Senate. The collapse of the Graham Platner campaign is a big problem for the Democratic Party. Really, any path to taking a majority in the Senate next year runs through Maine. That was supposed to be the easiest of the four seats they need to gain in order to win a Senate majority. Under state law, The process for picking a new nominee falls to the Democratic State Committee. But we don't know yet what process they will use to select a nominee. We only know that they need to do it quickly under state law they have until July 27 to name a new person and put that person's name on the ballot. If the Democrats lose Maine but hope to win back majority in the Senate, they'd have to win several states such as Texas, Ohio, and Iowa normally considered solidly Republican. And we'll hear from Aaron later on in the show about how political polarization has had an impact on America's faith in democracy. If there's one common threat of the AI boom across corporate America right now, it's an addiction for cheaper Chinese models. In many cases, particularly in Silicon Valley, companies are saving money by using Deepseek or Moonshot AI. instead of models made by OpenAI and Anthropic. Until recently, China and the officials there wanted to encourage the rapid spread of Chinese AI models sort of saw it as a form of soft power. And that's been working. Some of these models perform close to the levels of proprietary American ones. And American businesses have been adopting them because they cost a lot less to run. But now Beijing's concerned that sharing some of this technology could help. adversaries or malicious actors against China. That's journal tech reporter Sam Shetner. He says Beijing is now considering tightening its grip on homegrown technology. What we've seen is that there's a brewing price war around AI models. Tokens are expensive. And using the top tier models from Anthropic or Open AI is costing companies lots of money. So what many of them are doing is using switchers or different technologies that kind of root different queries that they might be using internally in business processes, where the complex ones, the higher end orchestrating queries might go to an American model that's expensive, and more routine ones or submodels running kind of parts of tasks.

will be rooted to cheaper Chinese models. At the same time, China said it has found what it called security backdoor vulnerabilities in several versions of Anthropics popular Claude Code tool released between April and June. A government-run cybersecurity platform said a built-in monitoring mechanism could pose a serious threat and advise users to update or uninstall the software. The concerns stem from a Reddit post last week that alleged Anthropic had secretly inserted code into the software to identify users who accessed it from China. In a response, an Anthropic employee said on X that the code was part of an experiment the American startup launched in March to prevent abuse from unauthorized resellers. Since February, Anthropic has accused Alibaba and several other Chinese AI labs of distilling its models. which is the practice of training a new model on the outputs of another. Alibaba told its employees it will ban the use of Claude Code at work from tomorrow. Competition is also heating up between the U.S. and China in the biotech sector. In China, streamlined regulation, increased insurance coverage for medicines, and the ease of recruiting patients for trials has turbocharged China's output of increasingly innovative drugs. And journal reporter Brian Gormley says American VCs are circling. Venture capitalists realize that companies are going to be looking for technological solutions to improving clinical research and they have been investing in companies that use artificial intelligence in various ways to make clinical studies run faster and better. For example, AI that plugs into electronic medical records to identify patients who can participate in a trial or AI that helps simulate clinical research and helps. researchers plan their trials. So there's a variety of ways that AI can be used to make clinical trials more effective in venture capitalists investing in a variety of different companies that are in that market. Brian says China's innovation engine and lower costs has resulted in many U.S. companies looking to the country to run their trials. For companies in the United States. A lot of them would like to take advantage of the speed and efficiency of clinical trials in China where patients can be recruited more quickly and at lower costs. So some are thinking about working with partners in China to conduct some of their clinical research there, generate some data, and potentially use that data as a springboard to launch clinical trials in the United States or globally. Many see that turn to China, threatening U.S. leadership in the biotech industry. with venture capitalists among those pushing for regulatory changes from the Food and Drug Administration. Policymakers and regulators in the United States realize that clinical trials run better or often run faster and lower costs outside of the United States. And that is making it harder for the United States to maintain its leadership in the biotechnology industry and making clinical trials more effective in the United States as part of the strategy for U.S. maintaining its leadership in that industry. Last month, the FDA disclosed plans to accelerate clinical research, including a proposed pilot to speed initiation of human studies.

A new poll from the Wall Street Journal has revealed that confidence is eroding in the two main pillars of American society, capitalism and democracy. Aaron Zittner leads our polling coverage and says the WSJNORC survey shows a fracturing of long-held beliefs in the so-called American dream. We set out to test some of the main elements of American national identity. How are folks feeling about the things that make us a nation, democracy, capitalism, commitment to equality, a sense that there's something unique and even superior about this country compared to other countries? And we found that fewer than half of Americans say that capitalism is working even... somewhat well, much less very well. People are pessimistic about the economy, pessimistic about the next generation. And very low shares said that the belief that no one is above the law, the belief that we have a fair judicial system, the belief that we're committed to democracy and majority rule, that those things describe America today either extremely well or fairly well. So the bottom line is we're not feeling very good about America. Republicans in the survey stood apart in their belief in American exceptionalism, the long-held idea that the U.S. is unique or superior among nations. But overall, more than two-thirds of people were pessimistic about where the promise of the American dream stood today, and the country's self-image as a leader among nations. We're almost united in our dissatisfaction. And we asked, are the best days for America ahead of it or behind it? And 62% said the best days of America are behind it. And we found majorities of Republicans and very high shares of independents and Democrats agreeing there. We're kind of united in our grumpy mood about this country right now. You can check out the full findings from the polling. We've left a link in our show notes.

And finally, the race is on to be the number one wearable. We're exclusively reporting that Whoop is bringing on Nike marketing veteran Durkion Van Hammerin to whip its brand into competitive shape as the company sets its sights on an IPO. Whoop is up against big players like the Apple Watch, which accounts for more than half of new health tracking smartwatches, Google's Fitbit, and ORA, which was valued at $11 billion last year and filed for its own IPO in May. But while many of the millions of Americans who wear a health tracker may be wondering what they'll be able to do with all that health data in the future, and whether it will be used to sell them wellness plans or more services, investors are questioning whether those companies can be valuable. Fitbit when they first came out, they had a hardware-only model. And then they acquired a health tech company one or two years in or so after they came public. And they started trying to go and introducing a subscription. Because otherwise, it's really easy to cannibalize your own revenues. That's health tech analyst Stephanie Davis, who spoke to WSJ's Take On the Week podcast to assess whether consumer health companies make a good investment. I think retail investor participation has changed in a dramatic fashion in the market. We've seen that with the SpaceX IPL, about a lot of retail investors getting involved. And there often are initial pops. Do I think... any of these wearables or a sustainable business model longer term? No, and that's probably what that investor is saying. But it's always a question of timing. I think a lot of times a familiar product investors on the retail side like to get involved because it's something that they know and they have understanding of the look and feel. Don't forget Fitbit doubled before it dropped down. You can find the full conversation on the latest episode of WSJ's Take On the Week. And while you're checking your sleep score, why not tap on your podcast app to set up a reminder for the latest episode of your favorite WSJ show? We're here to keep you up to date and in the green on news and current affairs. And that's it for what's news for this Thursday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sondra Kilhoff. And I'm Daniel Bach for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.

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